L. R. (Red) Wilson, Chairman, President and CEO, BCE Inc.
CANADA 2000--SYMPTOMS OF SUCCESS
Chairman: John A. Campion
President, The Empire Club of Canada
Head Table Guests
Margaret Scrivener, Former member of the Provincial Parliament for the Riding of St. David, member of the firm Martin & Meredith Limited Real Estate and Honorary Director, The Empire Club of Canada; Omar Kajouti, Grade 13 student, Danforth Collegiate and Technical Institute; The Rev. Charles Plaskett, Minster Emeritus, Timothy Eaton Memorial Church; Jean C. Monty, President and CEO, Northern Telecom Ltd.; C. Richard Sharpe, Chairman, Sears Canada Inc.; Peter D. R. Davies, British Consul General; Tom Wells, President, T.L.W. Consulting and a Director, The Empire Club of Canada; Ralph Barford, President, Valleydene Corp. Ltd.; Dr. Edward E. Stewart, Former Secretary of the Ontario Cabinet and Deputy Minister to the Premier; and Anthony S. Fell, Chairman and CEO, RBC Dominion Securities Inc.
Introduction by John Campion
At the dawn of the modern age in 1780, Emmanuel Kant had a problem. He was concerned less with science and more with God.
His metaphysical problem was defining a rational solution to the question of the duality of spirit and matter which had arisen in the interplay between philosophy, religion, literature and science.
In his critique of pure reason in 1781, and his metaphysical foundations of natural science in 1786, Kant addressed what he perceived the gulf between the purely materialistic world of scientists like Newton, which led inevitably to atheism and matters of religion and God. Kant wanted to bridge the gulf between the spirit and matter to harmonize the physical and the moral laws.
Kant solved his problem. As he saw it, the substance of reality was not space, time and material, but was represented by forces. He concluded electricity, magnetism and other observable phenomena were governed by the laws of attraction and repulsion within a unified theory of forces, all of which were convertible into one another.
Modern communications has a common connection with Emmanuel Kant. The progress of physical scientists, particularly in the emerging science of electrical physics, would not have proceeded with the speed and success that it did in the 19th and 20th century without this essentially metaphysical observation of Kant. Partly through the work of Davey, Faraday, Orsted, Volta and Ampere in electromagnetism, and the scientific and industrial revolutions which surrounded it, the world has restructured itself from a mainly agrarian society as late as 1800, through an industrial society during the century and a half that followed, to a knowledge-based society today.
The science of electricity and communications found themselves inextricably bound together in the 1840s with the development of the electromagnetic telegraph. Its impetus for development was war. Kaiser Willhelm of Prussia and Moltke, his Chief of General Staff, used this new communication technique to allow direct contact between headquarters and the advancing army. In this fashion, the army and their commanders kept an accurate check on large-scale strategic movements.
Together, with the development of rail transport, these two technologies allowed the brisk and decisive victories of the Prussians in 1866 and 1871.
At the same time, Alexander Graham Bell was beginning his work on the transfer of the human voice over the harmonic telegraph and thereby began the modern world of voice communication that has had such a major impact on our society.
The communications revolution which so affects us today is one of the pillars of our knowledge-based society. Kant was one of the essential forerunners of our brave new world.
Red Wilson is the Chairman, President and Chief Executive Officer of BCE Inc. BCE is the largest telecommunications company in Canada. Its principal telecommunications subsidiary is Bell Canada, having more than seven million business and residential customers, 9.5 million network access lines and some 58 per cent of the Canadian total.
Together with BCE's eight subsidiaries and affiliated telecommunications companies, it serves all or part of seven of Canada's 10 provinces and both territories, covering 70 per cent of the Canadian population. It is a major force in related and other business, including world class research and satellite technology.
Mr. Wilson was educated at Port Colborne High School and McMaster and Cornell Universities. He has been the Deputy Minister for Industry and Tourism in the government of Ontario, an executive involved in other industries, including the Bank of Nova Scotia and joined BCE in 1990. He is a director of a number of BCE companies and also Chrysler Canada Limited, Tate and Lyle PLC, Stelco Inc. and the CD Howe Institute. He is a governor of the Olympic Trust of Canada and McGill University. Please welcome Mr. Red Wilson.
Mr. President, honoured guests--may I say how delighted I am to be with you today.
I was, for many years, a member of this Club, and a supporter of The Empire Club Foundation. Regrettably, I have not attended a Club event since moving to Montreal some four years ago. I am deeply honoured with the opportunity to address this luncheon today.
Canada's first francophone Prime Minister, Sir Wilfrid Laurier, said almost 100 years ago, "The twentieth century shall be the century of Canada." Most of us, these days, have our noses too close to the grindstone, or too close to the axe we are grinding, to take a moment to look back over the last 100 years and ask the question: "Was that just political rhetoric, or has the Laurier prophecy been fulfilled?"
Undoubtedly, Canada has undergone massive change. Most of it has been enormously positive, not only in standard of living and quality of life, but also in human justice and social peace. Unlike the countries of Europe and Asia, Canada itself has escaped the ravages of war and revolution. Unlike our friends in the United States, we have not had to bear the full brunt of the costs of world leadership, nor do we have cities whose inner cores have been abandoned and have become too dangerous for civilised activity. Moreover, we have been living together successfully amidst great cultural and ethnic diversity during a time of enormous change.
Nonetheless, we all know that we now face some tough challenges. We must bring our debt under control. We must downsize and refocus our governments to make them more effective and affordable. We must make major changes in our approach to collective public governance. We could benefit, too, from a more positive, more confident attitude about ourselves as Canadians.
Today, however, I don't want to dwell only on these challenges, or deliver another businessman's lecture on why we must overcome them. I want also to focus on some of the advantages--some of the good things Canada has going for it in the emerging new world--what I call "symptoms of success."
An awareness of these symptoms and advantages can make confronting the tough things easier and more worthwhile, because the payoff for Canadians can be so large. If we think only of the challenge, it is easy to resist fundamental change. Canadians today must continue to have a strong sense that this country remains the greatest place in the world, where dreams can be realised, and where even better times are ahead.
What I want to do today is discuss three main themes and explain why I believe they can and will mean better things for Canada as we enter the year 2000:
• First, the kind of world we are moving into;
• Second, Canada's prospects for succeeding in this world;
• And third, the values Canadians hold, and our vision for the future of our nation.
From Sir Wilfrid Laurier's perspective 100 years ago, Canada's problems and opportunities were largely within its own borders. Canada was still not fully settled and was in the very early stages of political, economic and social development. Since then, Canada has had a century of development which most of the world envies. Today, our problems and opportunities are largely related to how we face the forces of the new world beyond Canadian borders--global forces.
What are these forces? Well, we now live in a world in which protective walls--within countries, governments and individual businesses, as much as between them--are beginning to hurt those whom they were designed to protect. Walls or barriers no longer work because there are now too many countries able to access and use productive technology and capital, and too many strong companies able to compete virtually everywhere and in virtually everything.
The result is that suppliers and producers are no longer king. The new king is the consumer. It is hopeless for any nation, or any business, to resist this reality. Japan, as the ultimate producer-is-king society, might well have discovered this a lot sooner if it had not lived in a world in which U.S.-led global growth masked some basic structural flaws in Japan's economy. This allowed Japan to pile up unsustainable increases in its trade surpluses with other countries, and to continue its walled-in practices at home. The same also turned out to be true for even the strongest corporations like IBM and General Motors. And it is now turning out to be true for governments and for trade unions--in fact, it affects each and every one of us.
What does it mean to say the consumer has become dominant? It means that the ability of businesses or other institutions to provide value has become the crucial survival and success test. Put another way, it is value competitiveness, not just cost competitiveness, that is the issue. Dick Currie of Loblaws has characterised value as "not paying too much for quality."
More and more businesses are finding out that there is only one way to provide value. It is to address both cost and quality at every stage, from product or service conception to final delivery and service follow-up. This must be done not only within the company itself. It also requires working directly and often extensively, proactively and in depth with suppliers. Moreover, governments must now also be seen as suppliers, for whom it is equally crucial to realise value. There can be no sanctuaries from this value test.
Before asking how well fitted Canada is for the new world, I want to make three points:
First, there are two sides to what is happening. On the one hand, the shift to a consumer-dominant, wall-less world, alongside the huge expansion of the global economic order that is now under way, is an enormous challenge, and not everything we now do will survive. But what is happening is also an enormous opportunity. We need to see it as both, and then get on with doing what is needed to seize the opportunity. We also need to see that opportunity as one that can only be seized successfully if we are all involved. It cannot be made to happen simply by edict from the top of either government or business.
Second, Canada, with just short of 30 million people, does not have to have a very large share of what is going on in order to do extremely well. We need not be daunted by the scale of emerging markets or our inability to respond to everything that is happening. Rather, we need to be selective about what we go for, and we can also afford to be so.
Third, the new world means that more things can be done in more places than ever before. For Canada, this means that our historic economic advantages, like our natural resources, may be less advantageous in and of themselves. But, it also means that our historic disadvantages--such as our relatively small and dispersed market, or our distance from major markets--are less disadvantageous than they used to be. This change will only bother us if we are self-protective and backward-looking. It can be enormously stimulating and productive if we look forward with well-based confidence.
How fitted, then, is Canada for this new world? I think extremely well on many counts, but perhaps not so well on others. I want to touch on just a few of the reasons why I believe that, taking all our pluses and minuses into account, we stand a great chance to do very well in this new world. And if we start now, we will see thousands of symptoms of Canadian success by the year 2000!
Let me start with the negatives. We are not alone--many countries in continental Europe are a good deal worse--but we have allowed ourselves to become much too attached to government. This is true of all of us. It extends to business, who often want subsidies, special tax concessions, tariffs and protected franchises. We have relied on government well beyond its capacity to deliver. My sense is that more and more Canadians understand this. The challenge now is to restore government to its appropriate role in terms of effectiveness and affordability.
We tend to be fearful of losing something vital in the process of change. But if there was any need for proof that we must change, as Finance Minister Martin said recently, the issue has become purely mathematical. Total Canadian public sector debt today is in the order of 100 per cent of our national income. This means we must grow at least as fast as the rate of interest simply in order to stand still. If we grow less quickly, which is likely, we will steadily reduce our standard of living.
Do I wish we Canadians had not got so far into debt? Of course I do. Do I wish we were moving on that debt a lot faster than we are? Absolutely. Do I wish we in the business community had been more successful in keeping a focus on fundamentals over the last 15 years? You bet I do.
Nonetheless, many Canadian businesses and individual Canadians have begun to face up to the problems of our excesses over the past 25 years, and to the challenges of global competition. I submit that we have bottomed out and are beginning to come up the other side. And we are starting to do much better in real terms. What we have done in our personal and business lives and what we have done on inflation, I am confident we can and will now go on to do in our governments, including enhancing the unity of the country. I believe we will succeed.
And so, we are beginning to face up to the issues of debt, government and governance that confront us. I don't want to suggest that this will be easy, painless or without costs. Or that it will happen automatically. Or that it will happen at the same pace all across the nation. But I believe Canadians will do, or see done, what has to be done. Put another way, Canadians are not going to throw away the gains of more than a century because they won't pay their bills, or face the tough realities of the 1990s.
Moreover, those realities are still not as tough as those addressed in the last few years by other much less well-endowed countries like Mexico and Argentina. Nor are these realities remotely as tough as those successfully faced by Canadians in two World Wars and the Great Depression.
This is our biggest single challenge--our sudden and recent attachment to borrowing year after year to keep our consumption--mainly our consumption of government services and handouts--above our income. I don't quite know how we Canadians, as normally sensible people, bought into this. We know better, and for the most part, we act on this knowledge in our individual and business lives. But I believe that Canadians now accept that this simply cannot continue, although perhaps not yet with the needed sense of urgency.
So let me turn to the positives.
First, in the last 10 years, we have been steadily bringing down our internal and external walls. It has been painful but it has been reinvigorating. The FTA, NAFTA and GATT are the external examples. There has also been a lot of deregulation and removal of protective barriers inside Canada. This is just what living in the new world requires. Moreover, it is already working for us. Our 1993 merchandise trade surplus was the best since 1987 and more than two and a half times what it was in 1991.
Under the Free Trade Agreement, Canadian trade with the United States has increased by $900 million per week for the last 24 months. Our two-way trade with the United States is up 20 per cent in each of the past two years. The biggest gains came in those exports directly liberalised by the FTA--in other words, by the removal of protective walls. Our total merchandise trade with the U.S. is projected to reach $300 billion this year--a singular measure of success.
What is killing our current account is the amount of interest we are paying on money borrowed abroad to maintain public expenditures at levels well beyond our ability to pay.
Second, we now enjoy something pretty close to stable prices. The United States has not been able to do nearly as well. This is giving us an important ongoing competitive advantage, which we would be very well advised to preserve. West Germany for many years used its superior inflation performance within the European Community to help it achieve the highest standard of living in Europe.
Third, the combination of aggressive business restructuring in the wake of the economic downturn and the FTA, together with our cost performance, has given Canada a major improvement in its unit labour costs relative to those of the United States over the last four years, both before and after taking the lower Canadian dollar into account--about seven points lower before adjusting for the dollar and about 20 points lower after adjusting. This makes Canada very competitive--and we must be careful to maintain this superior cost performance. We are currently also better than Japan, Germany and the United Kingdom on an exchange-rate-adjusted basis.
Fourth, while our private sector and governments don't always work well together, we sometimes get it broadly right. For example, while there are many shortcomings in our current health-care system which must be dealt with if it is to continue to deliver value, many of these are already being addressed in at least some of the provinces. But overall, we have a system which is good both for us as individual users and for society. It also better meets both the cost and the competitive value test than its counterpart in the U.S. Given that health costs exceed 10 per cent of our national income, this is an important area in which to have an advantage.
Fifth, technology is also a fundamental building block. Canada is not big enough to support technology development on the scale of the United States, Japan or Germany. Nor do we need to, given the increasing accessibility and transferability of a very broad range of technologies. But Canadians are world-class in many fields, and this means not just hardware, but software and know-how and their effective human application.
If I may be permitted a brief commercial, Mr. President, telecommunications is a field in which Canada, by force of geography, inspiration and application, has excelled. Investments in people and in research and development are paying dividends. We are recognised as a world leader for the quality and the efficiency of the service we provide to Canadians.
It is not just the BCE family of companies--companies such as Bell Canada and Northern Telecom--which I proudly represent, but a Canadian commitment to excellence in telecommunications that has spawned the innovation and diversification represented by companies such as Newbridge, COREL, New Brunswick Tel, SR Telecom and many others in this exploding industry.
In our company, we are determined to make decisions and make investments which will continue to assure a leadership position for BCE domestically, and enable us to seize opportunities on a global scale.
That is why, here at home, we have launched the Beacon Initiative--a coast to coast "information highway" as historic as the building of our national railway more than a century ago. We will establish broadband capacity across Canada to move information and knowledge--the most prominent resources of the future economy.
We have also launched a new company--MediaLynx--to develop multimedia software and content for this information highway. This will provide opportunities for the creative talents of Canadians. We also envisage specific state-of-the-art services for better education and better health care--in short, the seeds for a better quality of life for Canadians.
We are expanding globally to take advantage of a more open and more competitive environment for telecommunications equipment and services. Our strategy is prudent but deliberate. We intend to continue to support Northern Telecom in developing new products and systems and new international markets. Northern's revenues this year will exceed Cdn $12 billion, and more than Cdn $10 billion will be generated outside Canada.
Bell Canada International, and Tele-Direct International, our white and yellow pages directory company, will continue investing abroad where they can leverage the technology and expertise developed here in Canada. By the end of 1994, these three companies will have invested more than Cdn $11 billion outside Canada. These activities sharpen our advantage at home. They make us a better competitor. More importantly, they ensure a prominent stake for Canada in one of, if not the most dynamic sectors for the next century.
I come, then, to the third theme in my remarks today. What values do Canadians hold? What are our hopes and dreams for our future and the future of our nation? I think it was Winston Churchill who described his wartime colleague and Leader of the British Labour Party, Clement Atlee, who defeated him in the 1945 election, as "a modest man with much to be modest about." While Canadians may have a reputation for being modest, we have every reason to take pride in our accomplishments.
There is nothing modest about Canada's success. While we may not always boast about it, we do believe we live in the best country in the world. But even though we may believe it, we find it a bit awkward, almost unCanadian, to actually say it. Perhaps it is our colonial heritage or the experience of growing up alongside a boisterous, super-confident powerhouse south of our border. Psychologists would have a field day analysing the diffidence or hesitance of Canadians about ourselves. When the U.N. declared that Canada was "number one" in terms of quality of life, a typical reaction in Canada was "Isn't that a bit much?" It is even said that Canadians are reluctant to dream--except with the benefit of a federal-provincial grant!
But every successful country--like every successful company or individual--does have a dream or vision. Perhaps Canadians don't have the kinds of visions that imperial or messianic countries have. So what do we dream about?
Well, let me try my hand at expressing that. I believe we dream about a Canada where our children--and our children's children--will have the opportunities that we have had--opportunities to work, to raise a family, to contribute, to set goals and see them realised, to enjoy success, to achieve recognition, to be free. We dream about a society where duties and responsibilities are fulfilled and where a sense of community prevails. And we dream about leaving our family, our community, our nation better off than we found it. We dream about pride and achievement. I believe we dream about this land and this nation called Canada.
If the mythical genie came to us and offered Canadians just three wishes, what should they be? Perhaps we should pose this question to all Canadians--especially our young. We might be surprised by the responses.
I remember one of the homilies I read many years ago in the Reader's Digest to the effect that one must be careful what one wishes for because one might actually get it. Well, here are my three wishes for Canada:
First, help us to come to grips with the obvious dichotomy between our fundamental values and our behaviour. We must abandon the notion of entitlements and champion thrift, self-reliance and character.
Second, help us to celebrate success--to take pride in excellence and in our achievements.
And third, help us to champion Canada--a Canada with strong national institutions and regionally responsive and responsible governments.
Above all, we need leadership. Leadership to deal with our fiscal and governmental baggage. A broad consensus to tackle this problem exists from coast to coast. I don't believe our governments can or will fail to act. Leadership to ensure that Canadians seize the opportunities of the 21st century. We are among the most fortunate and most envied nations on earth. We simply cannot and must not squander our heritage.
I submit that we have begun the journey back. Symptoms of success are evident--all across the nation and particularly among our young. But we must all continue to raise our expectations of ourselves and to shorten our time frames.
While the twentieth century may not have completely fulfilled Laurier's prophecy, our nation's progress has been remarkable. Now we stand at the gates of a new millennium. While some handicappers and bookmakers may be offering somewhat longer odds on our success in the next 100 years, I, for one, Mr. President, intend to continue to bet on Canada.
The appreciation of the meeting was expressed by Tom Wells, President, T.L.W. Consulting and a Director, The Empire Club of Canada.